The red-brick buildings in Surrey Research Park are deceptively bland. But in a small section of this sprawling estate lies Lionhead Studios, a computer game design company that probably accounts for more intelligence per square mile than is to be found in the whole of the surrounding Guildford area. And perhaps beyond.

"The people involved in making a computer game nowadays have to be just amazingly clever," says Peter Molyneux, Lionhead's founder, brimming with paternal pride. When I meet his team later on, it's clear that this is true about more than a few of Lionhead's employees.

Molyneux is no intellectual slouch either. Regarded as the grand master of the British computer games industry, he has been designing them since the early Eighties. In 1987 with Bullfrog - his company - he developed a whole new genre of gaming by developing Populus - the gamer as a deity ruling over his minions - which proved a popular alternative to the shoot 'em up and adventure games. Populus spawned many imitators but remains one of the top 10 most successful computer games of all time. A decade later, Molyneux sold Bullfrog to Electronic Arts, making himself a millionaire and leaving as his legacy, Dungeon Keeper - EA's biggest-selling game ever.

A popular speaker at new media conferences - he was once billed above Bill Gates - Molyneux was nevertheless surprised by an invitation 18 months ago from Bafta (the British Academy of Film and Television Arts), asking whether he would be part of the new Bafta Interactive Media Committee. The computer games industry being courted by the likes of Lord Puttnam and Bafta would have been wishful thinking 10 years ago. Now, though, computer games and interactive media are considered to be an art form in their own right and have their own annual Bafta Interactive Entertainment Awards.

"Recognition by Bafta doesn't sound like a big thing," Molyneux says. "But sitting on their committee, you realise that it is a huge thing, and they take it very, very seriously." This was clearly the case when Molyneux chaired a Bafta Interactive event recently involving a panel of television producers, directors and special-effects artists who were asked to reflect on the topic: "When Games go to the Movies".

"I think Bafta's attitude is very much what the whole of the film industry's attitude is; they know that the computer game industry will - in some form - be a real entertainment option in the future. The big problem is that people who work in film are deeply, deeply scared of, or uneducated about, the computer game industry."

However, they will be able to learn from the master on Wednesday night, when the debut game from Lionhead, Black and White, will get its first public showing at Bafta, with Molyneux explaining the different stages of developing a game.

His game will no doubt be of interest to other Bafta members. After all, movie companies are now making films out of games, rather than the other way around. Film versions of Doom, Tomb Raider, Duke Nukem and Ridge Racer are all due for release this year.

"It's mainly because of Lara Croft," says Molyneux, explaining just how the tables have turned in the five years since the games industry - and the buying public with it - started going crazy for anything with a movie licence attached.

"Up until Lara," he points out, "we were playing with plumbers and hedgehogs. All of a sudden the gaming industry found this weird thing called sex."

Will such game-to-film projects share a similar creative nadir with the Batman franchise? "Once Hollywood has used up all our properties, then that's it," Molyneux believes. "Computer games are an independent form of entertainment; they don't fit snugly into films." And he has a point: interactivity is just one of the most obvious differences between going to see a movie and playing a computer game.

"How many really quality scripts does Hollywood come out with in a year? Can you imagine how much harder it would be to write an interactive script?"

Instead, Molyneux imagines that the games industry in the future will make games that have the home entertainment value of, say, colour television. But, as he openly admits, there are a number of changes the industry must face; this is where the skill and insight from organisations like Bafta and people who work in the film industry come in.

"A lot of people say games are at the same stage as television was when it went from black and white to colour. I would argue that the games industry is still on the pier, a rotation machine showing What The Butler Saw," Molyneux says. "That is where we are in film terms, compared with where we will be."

New consoles, such as the next generation PlayStation (coming in autumn 2000), will soon be able to make games that look almost like movies. "Which means using a lot of the skills you use to make a film to make a game," Molyneux claims.

"The most important challenge is emotion," he says, and adds to this the need to develop non-linear plots ("if it's an adventure game they solve this puzzle; a shoot 'em up, you shoot down this person"), mass- market appeal ("people hate losing, they really, really loathe it. If someone isn't a dedicated gamer they aren't going to do the same thing over and over again"), expense ("to draw an old-style character would have taken two days, and it now takes three months) and accessibility ("you have the same amount of time it makes to move from television station to station to convince people that your game is good").

The creative talent at Lionhead is enough to make you wide-eyed in amazement, never mind the dedication, and it seems entirely possible that Molyneux and his crew will solve these problems, with or without the help of the film industry. The most convincing evidence of which is Black and White, which is scheduled for a September release.

Imagine this: no long introduction, no icons, special options or text, but in its place an immediate window into Black and White's green and pleasant land. While the visual qualities are stunning, it's the plot that is truly innovative. To put it simply: the gamer is a leader in charge of a host of communities, but is never shown. As you play, the game catalogues all your decisions and develops a virtual representation of your character, discovered through the way you move the mouse, how you teach your community, what moral code you live by...

Tapping into your moral codes is not so far removed from David Cronenberg's new Sci-Fi film, eXistenZ, in which a game taps into the deepest fears and desires of the players. In Black and White, if you are an evil leader, you will see your dark soul reflected back at you.

Or, as Molyneux puts it: "You invent the morality; you are not playing a character that someone else invented. Which is very, very different. And if you are in a bad mood one day, the game will play differently from when you are happy. It's Tamagotchi a million years on."

Peter Molyneux previews Black and White this Wednesday from 7pm to 9pm at Princess Anne Theatre, Bafta, 195 Piccadilly, London. Members free, non-members pounds 7.50. For more information see the Bafta website (www.bafta.org)